Bryan County v. Yates Paving

• Decision Date: 30 November 2006
• Docket Number: No. S06G0119.,S06G0119.
• Citation: 638 S.E.2d 302
• Parties: BRYAN COUNTY v. YATES PAVING & GRADING CO., INC., et al.
• Court: Georgia Supreme Court

638 S.E.2d 302

BRYAN COUNTY v. YATES PAVING & GRADING CO., INC., et al.

No. S06G0119.

Supreme Court of Georgia.

November 30, 2006.

David H. Johnson, McCorkle, Pedigo & Johnson, LLP, Savannah, Charles H. Brown, Brown Rountree & Stewart PC, Statesboro, for Appellant.

David R. Smith, Joseph Y. Rahimi II, Brannen, Searcy & Smith, Leonard W. Childs Jr., Savannah, American Arbitration Association, Atlanta, for Appellee.

MELTON, Justice.

We granted certiorari in this case to determine whether the Court of Appeals erred by holding that an arbitrator, rather than a court, should determine the res judicata effect of a previous arbitration on a subsequent arbitration. Yates Paving & Grading Co. v. Bryan County, 275 Ga.App. 347, 620 S.E.2d 606 (2005). Because the application of res judicata involves a matter that the parties did not expressly intend to be resolved only by an arbitrator, we reverse the Court of Appeals.

The underlying dispute in this case arises from a public works contract between Bryan County and Yates Paving & Grading Co., Inc., ("Yates"). Pursuant to the contract, Yates agreed to construct and make improvements to public roads within a Bryan County subdivision. The County thereafter ordered Yates to halt construction and hired a third party to complete the project. Yates filed a demand for arbitration and, after a full hearing, won an award of monetary damages, which was confirmed by the trial court and affirmed on appeal.¹ See OCGA § 9-9-12; Bryan County v. Yates Paving & Grading Co., 251 Ga.App. 441, 554 S.E.2d 584 (2001).

Three years later, Yates filed another demand for arbitration under the contract, claiming the County's wrongful conduct rendered Yates unable to bid on other government contracts. Bryan County answered and asserted in a cross-claim that the new claims for damages were barred by the doctrine of res judicata because they were not raised in the first arbitration. Bryan County filed a motion for summary judgment on its claim that res judicata barred the demand for arbitration and, following a hearing, the trial court granted summary judgment to Bryan County and denied Yates' motion to compel arbitration. The Court of Appeals reversed, holding that because the res judicata effect of the first arbitration award fell within the scope of the parties' agreement to arbitrate, the arbitrator, not the court, should have decided whether the arbitration was barred by res judicata. Yates Paving & Grading Co. v. Bryan County, 275 Ga.App. 347, 620 S.E.2d 606 (2005).

Despite the existence of a valid arbitration agreement, a trial court must determine whether the claims covered by the agreement are actually arbitrable before submitting them to an arbitrator. AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649(II), 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) ("[T]he question of arbitrability ... is undeniably an issue for judicial determination ... [u]nless the parties clearly and unmistakably provide otherwise."). In fulfilling this gatekeeping duty, the trial court "shall not consider whether the claim with respect to which arbitration is sought is tenable nor otherwise pass upon the merits of the dispute." OCGA § 9-9-4(d). This does not mean, however, that a trial court is prohibited from considering certain procedural mechanisms that may eliminate substantive claims from consideration by an arbitrator, even though such mechanisms would effectively dispose of the underlying claims on the merits. See OCGA § 9-9-5(a) (trial court has discretion to determine whether "a claim sought to be arbitrated would be barred by limitation of time had the claim sought to be arbitrated been asserted in court.")

Res judicata acts as a procedural bar to claims that were raised or could have been raised in a prior action. Walker v. Penn, 271 Ga. 609(1), 523 S.E.2d 325 (1999); OCGA § 9-12-40. As a procedural bar, res judicata operates to eliminate substantive claims, but it does not do so by reaching the merits of those claims. See OCGA § 9-12-40. Indeed, the merits have already been or should have been resolved in the prior lawsuit. Thus, the trial court here was not passing on the merits of appellee's underlying arbitration claims by applying res judicata. It was merely fulfilling its gatekeeping role to determine whether any arbitrable claim had been presented in the current action. Where the claims presented are barred by res judicata, no arbitrable claims remain to be submitted to an arbitrator.

The language in the arbitration agreement providing that "[a]ll claims, disputes and other matters in question between [the parties] arising out of, or relating to the Contract Documents ... will be decided by arbitration," does not indicate that the parties expressly intended only for an arbitrator to resolve the issue of res judicata, which is a principle of law that does not arise out of the contract documents. See Waterfront Marine Constr., Inc. v. North End 49ers Sandbridge Bulkhead Groups A, B, and C, 251 Va. 417, 425-426(I)(B), 468 S.E.2d 894 (1996). Res judicata is not a claim "arising out of or relating to" the parties' contractual arrangement, but a procedural bar to claims that have already arisen and been resolved by prior arbitration. Id. at 432-433(II)(B)(1), 468 S.E.2d 894. As noted above, when res judicata applies to procedurally bar a claim, the trial court does not even reach the merits or lack thereof of the substantive claim that a party has attempted to raise. Because arbitration has already taken place on the issues that were previously raised, there is nothing left for an arbitrator to resolve relating to those same issues.²

Moreover, the purpose of arbitration is to provide a swift and inexpensive means for parties to resolve their disputes. See Greene v. Hundley, 266 Ga. 592, 597(3), 468 S.E.2d 350 (1996). That goal was accomplished once the parties took their claims to arbitration the first time. The arbitration agreement itself even emphasizes that "[t]he award rendered by the arbitrators will be final." Extending the process further by requiring that the trial court send the procedural matter of res judicata to arbitration in this case, absent the parties' express agreement that the matter be submitted to arbitration, defeats that purpose. The trial court properly fulfilled its gatekeeping role, and further served the overall purpose of Georgia's Arbitration Code, in considering whether appellee's claims were procedurally barred by res judicata without referring the matter to an arbitrator. We therefore reverse the judgment of the Court of Appeals requiring that the matter of res judicata be resolved by additional arbitration in this case.³

Judgment reversed.

All the Justices concur, except SEARS, C.J., HUNSTEIN, P.J., and BENHAM, J., who dissent.

HUNSTEIN, Presiding Justice, dissenting.

At a time when both the legislature and courts of this State are encouraging participation in arbitration as a means of providing a more efficient and less costly means of resolving disputes, a majority of this Court ignores the arbitration scheme established by the legislature, the policy favoring arbitration of disputes, and the language of the parties' arbitration agreement and holds that a claim of res judicata raised in defense to a dispute under the contract is not an arbitrable issue. Consistent with the provisions of the Georgia Arbitration Code limiting the issues to be considered by trial courts when ruling on motions to compel arbitration and the parties' agreement to refer to arbitration all of the claims, disputes, and other matters arising out of or relating to the public works contract, I would agree with the Court of Appeals and hold that the applicability of Bryan County's res judicata defense was an issue to be decided by the arbitrator. Accordingly, I respectfully dissent.

The Georgia Arbitration Code, OCGA § 9-9-1 et seq. ("GAC"), provides that "[a] written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit any controversy thereafter arising to arbitration is enforceable without regard to the justiciable character of the controversy." OCGA § 9-9-3. Under the GAC, the court's review of a motion to compel arbitration is limited to deciding two issues: whether a valid agreement to arbitrate exists and whether the claim in dispute is arbitrable under the language of the arbitration agreement. OCGA §§ 9-9-2(c), 9-9-3, 9-9-6.¹ All other issues, whether procedural or substantive, are to be submitted to the arbitrator for consideration. See OCGA §§ 9-9-3, 9-9-4(d). In this case, it is well-established that the parties' agreement to arbitrate is valid, see Bryan County, supra, 251 Ga.App. at 443, 554 S.E.2d 584, and that the claim underlying the dispute is arbitrable under the language of that agreement. Thus, the two issues for the trial court under the GAC already have been decided in this case.

The majority, however, rejects the legislature's determination that all other issues are for the arbitrator and instead creates a new, judicially imposed issue for courts to resolve. Ignoring both the State policy favoring arbitration of disputes and the language of the GAC restricting the role of the court where parties agree to arbitrate, the majority justifies its holding on three separate bases. The majority first argues that trial courts are authorized to consider issues of res judicata because application of the doctrine is a procedural issue not requiring courts to determine the merits of the underlying dispute. This holding, however, directly contravenes OCGA § 9-9-4(d), the statute prohibiting courts from considering either the tenability or the merits of a claim with respect to which arbitration is sought.

The majority opinion further concludes that the issue of res judicata was for the court to decide because that issue did not arise out of or relate to the contract documents. That...